Let me preface this post with 2 ideas – first, a double dip recession is a very rare thing. Outside of the late 70s, early 80s situation we have not had one in many decades. Second, I don’t think we really ever came out of the Great Recession. If you pump an economy with a $3-4 trillion you can make any economic figure jump and sing its praises. The equivalent of what the U.S. and indeed global governments and central banks have done is simply pump the patient with oodles of morphine. If we did a census every 15 months, cash for clunkers every 12 months, housing bribery nonstop (step up and get yer free $8000!), unemployment checks forever, non payment of mortgages by a significant class of households, and a $800B stimulus every 9 months, along with keeping interest rates at zero forever… well I suppose we’d never have a recession. And as epic of a stimulative plan that was taken in the U.S., the Chinese did something even bigger in their economy [Feb 16 2009: Is China Pulling an Alan Greenspan?] – and effectively they have been the world’s driver the past 18 months. So to call what is coming down the pike a ‘double dip’ would be in a way very misleading… it’s all going to be one huge dip, interrupted by a string of quarter benefiting from a Chinese tsunami of money plus ripping away any benefit from domestic savers while loading future generations with much more debt. All to push off what is inevitable.
Last night we received some terrible news… Ben Bernanke forecasts no double dip. If you know this man’s track record as one of the poorest economic forecasters on Earth, Ben has just guaranteed a ‘double dip’. [Jul 29, 2009: Mises.Org – the “Ben Bernanke is Wrong” Video] Considering the access to financial and government information this man has, his (and his organization’s) track record is that much more embarrassing.
Federal Reserve board chairman Ben Bernanke said Tuesday he didn’t think that the U.S. economy would slip back in to recession, saying that consumer spending and business investment seem strong enough to keep the economy growing, albeit at a relatively subdued rate.
Bernanke was interviewed by ABC News reporter Sam Donaldson at a dinner sponsored by the Woodrow Wilson International Center for Scholars. Coming into 2010, the big question was whether the economy would “get its own legs” and not have to rely on government fiscal medicine and inventory behavior, Bernanke said. “So far the news is pretty good,” Bernanke said. “We’ve seen consumer coming back. We’ve seen firms spending more. There are some signs the private sector is picking up the baton and moving the economy forward,” he said.
Bernanke quickly noted that there were “caveats” to this forecast. Growth was still not fast enough to bring down the high unemployment rate. In addition, the U.S. banking sector was “not completely healthy,” he said. Banks were still deleveraging and not making as many loans as “we’d like to see,” Bernanke said.
On relations between the United States and China, Bernanke said there is a real desire between the two superpowers to work together to ease trade and economic tensions. Both countries sort of understand there is a “co-dependency relationship,” Bernanke said. The United States snaps up Chinese goods and the Chinese is a major buyer of the U.S. government’s debt.
Asked about the European debt crisis, Bernanke repeated that the Fed was watching the situation closely but gave no insight into how weaker European growth might impact the U.S. economy. Bernanke said the European banking and debt woes were reminders that the U.S. had to get its fiscal house in order with a “medium-term exit strategy.” He said it would not be possible for the U.S. to take swift measures to cut the deficit but said a plan needed to be crafted that would lower the debt over time. (it’s only possible in Europe, not in the US) Asked if he saw any such plan taking shape, Bernanke replied “no.” (Bernanke did note he saw a tin can swiftly fly through the air outside his office window and noted a group of Congress folk high fiving, while making swinging motions with their legs)
Luckily Ben always has a side career as a comic.
* Asked when the Fed will start raising interest rates, Bernanke quipped “in the future.”